RIL agrees for CAG audit on KG-D6

The Comptroller and Auditor General of India (CAG) has sought an audit of Reliance Industries' spending on eastern offshore KG-D6 block in 2012-13, a request the company responded by asking the auditor to scrutinise records of not just that year but also 2013-14.

CAG, in the third round of audit of KG-D6 as well as three other oil and gas fields, on November 11 wrote to RIL seeking records to audit spending in 2012-13.

"It is intended to commence the field audit on December 1, 2014... The field audit is expected to be completed by the first week of March 2015," CAG wrote.

To this, RIL responded with a request to add financial year 2013-14 to the scope for the audit of KG-D6.

"This is because data and documentation for 2012-13 and 2013-14 are all contained in one server, and administratively and to save time and effort, it should be convenient to both the audit team as well as the operator if the audit for both the financial years are conducted together," RIL wrote to CAG.

It offered full co-operation to CAG for this audit but cautioned that audit should be in letter and spirit of the Production Sharing Contract (PSC) signed by the government for KG-D6 fields.

RIL said, "It was happy to note that CAG has been appointed by the Ministry of Petroleum and Natural Gas under Article 25 and Section 1.9 of the Accounting Procedure of the PSC as the Government's representative (to conduct scrutiny of spending)."

The company said it is agreeable to such an audit whose scope and nature should be in line with what was spelt out in the Oil Ministry's letter of January 2013.

The Ministry had in January 2013 agreed that the audit under PSC should be a financial scrutiny and not a performance audit of the company.

It had told CAG that the provisions of PSC provide for a government-appointed auditor inspecting and auditing all records and documents supporting costs, expenditures, expenses, receipts and income.

The CAG had in the first round audited KG-D6 spending for 2006-07 and 2007-08 and in the second round completed audit of spending till 2011-12.

The report of the second part audit is to be tabled in Parliament in the ensuing Winter Session.

In response to draft CAG findings, RIL had raised concerns on the veracity of observations made by CAG on complex technical/operation issues with the benefit of hindsight.

Given the complexity of the project, various technical and operational decisions are made during the course of project implementation with the objective of overall costs and schedule rather than impact of single decision, it had said.

Challenging every decision on a standalone basis with the benefit of hindsight would completely destroy the risk taking ability of the industry and would impact the implementation of complex projects in any sector, RIL had stated.